Tuesday, April 20, 2010

Even Halperin

It was a lively discussion on "Morning Joe" this morning, when White House economic adviser Austan Goolsbee appeared to discuss Wall Street reform. In particular, he explained why GOP talking points about "bailouts" aren't just wrong, but are in fact the opposite of reality.

Goolsbee also did a nice job highlighting the GOP's motivations for repeating obvious nonsense: "Everybody knows a consultant just handed them that line and they're just reading it. It doesn't matter what's in the bill. It could be a bill about breakfast cereal and they're going to say this is a bailout bill."

But what was especially interesting this morning was the moment when host Joe Scarborough turned to Time's Mark Halperin, and urged him to "defend the Republican position" on the legislation. Halperin, who often seems more than sympathetic to the GOP line, couldn't bring himself to support the Republican arguments.

"I cannot defend what they're doing," Halperin said. "They are willfully misreading the bill or they are engaged in a cynical attempt to keep the president from achieving something."

Note to Republicans: when even Mark Halperin is calling you out for lying, the conventional wisdom is turning against you.

It isn’t every day that a consumate inside-game reporter/pundit type like Mark Halperin aggressively calls out one party for lying, but that’s exactly what Halperin did early this morning on MSNBC, talking about the GOP claim that the Dem financial reg reform bill will lead to a permanent bailout....The point here is that Halperin is taking a stand, saying, in effect, that the GOP position is wrong and that the Goolsbee position is right.

Some of the shrewdest analysts of American finance have argued that financial panic of 2008 was less a matter of lax regulation or reckless bets than a broader crisis of political economy -- one in which the financial sector had simply become too large to fill its proper role in the larger economy and its power, relatedly, too great in Washington to be restrained within healthy bounds.

Along those lines, I sometimes think that a cultural anthropologist might be better prepared to analyze what's happening today between the White House and Goldman Sachs than a political analyst or financial commentator.

Remember, Goldman CEO Lloyd Blankfein was one of three Wall Street CEOs who famously stood President Obama up at a meeting at the White House back in December. Now, in response to the SEC's fraud suit, which it has made clear it will fight aggressively, Goldman has taken the eye-popping step of retaining the services of Greg Craig as its chief legal defender.

Now, as you know, until recently, Craig was President Obama's chief lawyer, as White House counsel. And protestations aside, few people believe White House claims that Craig left of his own accord. So hiring the president's former lawyer as part of a brewing battle with the White House is unquestionably the sort of high-stakes, aggressive play that one associates with the kind of Wall Street trader who makes it all the way to the top. Constantly upping the ante and lead with your fists.

Yet even the Milton Friedman and Ayn Rand lovers at the IMF are scared by the financial services monsters they helped enable, those large multinational financial institutions that the twin gospels of "globalization" and "de-regulation" birthed. Even the IMF is now warning that financial reform to eliminate the systemic risk that still exists in our global financial system, and which if not dealt with son may lead to the next financial collapse, one that this time we may not be able to prevent from turning into a global Great Depression:

Time is running out for governments to overhaul regulation of global banks that have become bigger and more powerful since the start of the financial meltdown three years ago, the International Monetary Fund warned today.

In its half-yearly health check on the financial sector, the Washington-based fund said there was an urgent need for international co-operation to tackle the systemic risks posed by banks deemed "too big to fail".

"The future financial regulatory reform agenda is still a work in progress, but will need to move forward with at least the main ingredients soon", the IMF said in its Global Financial Stability Review. "The window of opportunity for dealing with too-important-to-fail institutions may be closing and should not be squandered, all the more so because some of these institutions have become bigger and more dominant than before the crisis erupted.

"Policymakers need to give serious thought about what makes these institutions systemically important and how risks to the financial system can be mitigated."

These aren't a group of Marxist-Socialist-Fascists making these warnings. This is the premier international organization created after WWII to re-establish the wrecked economies of war torn countries and spread capitalism around the globe. It is also an organization that is less diverse and more mainstream than any other international organization. And by mainstream I mean the IMF has always followed the c=dominant thinking of the leading economists of the day. This is "who they are:

The bulk of IMF analysis has always been mainstream and centrist, viewed from the perspective of the dominant strain of Anglo-Saxon economics. The leading universities of North America, the United Kingdom, and Australia have been the main training grounds for much of its professional staff. Martha Finnemore, a political scientist who has studied a number of large organizations, has even claimed that the Pentagon displays more intellectual diversity than the IMF. [...]

These are the people that Nobel prize winning economist Joseph Stiglitz once referred to as outdated in their thinking and patronizing in their approach to transformation of the global economy:

The mathematical models the IMF uses are frequently flawed or out-of-date. Critics accuse the institution of taking a cookie-cutter approach to economics, and they're right. Country teams have been known to compose draft reports before visiting. I heard stories of one unfortunate incident when team members copied large parts of the text for one country's report and transferred them wholesale to another. They might have gotten away with it, except the "search and replace" function on the word processor didn't work properly, leaving the original country's name in a few places. Oops.

It's not fair to say that IMF economists don't care about the citizens of developing nations. But the older men who staff the fund--and they are overwhelmingly older men--act as if they are shouldering Rudyard Kipling's white man's burden. IMF experts believe they are brighter, more educated, and less politically motivated than the economists in the countries they visit.

So these are not hot headed communists seeking to destroy our freedoms. Far from it. If they had their preference they would all be still be worshiping at the twin altars of Milton Friedman and the "Free Market" to solve all of our current economic problems. Unfortunately for them, even they now realize that government has a role to play in harmonizing and stabilizing the financial markets, and that bigger is not always better in the world of finance, even if that was the ultimate result of the policies they promoted and in which they put their trust and faith.

When even the IMF turns against the Mega Banks and Wall Street Gangsters (Hello there Goldman Sachs!) who are fighting tooth and nail to derail financial reform with their "friends" in both parties (but especially the Republicans led by Mitch McConnell) it behooves us, especially those indoctrinated in the faith that unfettered free markets solve all problems, to take their warnings seriously.

Twenty years ago these were the people who supported the policies of globalization, the free flow of capital around the world and financial de-regulation by governments inn order to allow the financial markets to expand exponentially. These were the people who supported the growth of large, integrated financial institutions that could do everything from selling stocks and bonds, to investment banking, to commercial and residential loans, to providing insurance.

The IMF staff may never come right out and say that they were wrong, but in effect that is what this most recent report urging immediate reform and re-regulation of the multinational megalithic financial institutions represents: an admission that what they thought they knew about macroeconomic was seriously flawed. It's time that those on the right who still believe reasonable regulation of banks and Wall Street is an infringement on "their freedoms" reach the same conclusion.

President Obama nominated Lael Brainard to be an Under Secretary of the Treasury for international affairs, and Senate confirmation was expected to be pretty easy. Her background and qualifications are impeccable, and Brainard was likely to get bipartisan support. Given the importance of having competent Treasury Department officials in place during a global economic crisis, it made sense to have the Senate move quickly on the nomination.

That didn't happen. Brainard was nominated in March 2009. Last night, 13 months after receiving the nomination, the Senate voted to end obstructionist tactics and allow senators to vote up or down on Brainard's nomination. The cloture vote was 84 to 10.

With such broad bipartisan support, why did it take more than a year for the Senate to bring Brainard's nomination to the floor? Because Senate Minority Whip Jon Kyl (R-Ariz.) had a hold on the nomination.

Brainard, who is set up for a cloture vote today at 5:30pm ET, has been nominated to serve in a position critical to engaging China and representing U.S. interests at the G-20, the International Monetary Fund and the World Bank, among others.

Brainard, a highly qualified expert in international economics, is a devoted public servant who has spent most of her career serving the American people. She previously served with distinction as: Deputy National Economic Advisor for President Bill Clinton; Vice President and Founding Director of the Brookings Institution's Global Economy and Development Program; Associate Professor of Applied Economics at MIT Sloan School; a White House Fellow; and a National Science Foundation Fellow.

Brainard is supported by: U.S. Chamber of Commerce, Business Roundtable, U.S. Council on International Business, Business Council for International Understanding, Council of the Americas, Coalition of Services Industries, Emergency Committee for American Trade, National Foreign Trade Council, National Association of Manufacturers.

And why did Kyl block a vote for more than a year? Because the far-right Republican isn't satisfied with -- get this -- administration enforcement of prohibitions on internet gambling. Seriously.

As former Federal Reserve Chairman Paul Volcker recently put it, "How can we run a government in the middle of a financial crisis without doing the ordinary, garden-variety administrative work of filling the relevant agencies?"

Senate Republicans are acting like children playing with matches. Jon Kyl isn't some random backbencher, he's the #2 Republican in the chamber. Presumably, he's in a position to realize the adverse consequences -- for the government, for the administration, for the entire country -- of his indefensible obstructionism.

A mature, functioning democracy simply can't operate this way and expect to thrive.